Rising dollar value of textile exports
THE increase in cotton and yarn prices are beginning to show in the rising dollar value of textile exports, which rose 23.65 per cent to $4.107 billion in the first four months of the current financial year from $3.321 billion a year ago. The export numbers released by the Federal Bureau of Statistics indicate that export of all value-added textile products - knitwear, bed-wear, towels, readymade garments, textile made-ups, etc - had registered growth this year. Knitwear grew by 21.39 per cent to $754 million from $621 million a year ago. Exports of bed-wear, towels and readymade garments grew by 15, 14, and 38 per cent during the first four months.
The textile exports during the first quarter of the current financial year to September had increased by 21 per cent to $2.92 billion from $2.42 billion a year earlier. The export data for the quarter show that the unit price of all the textile products save knitwear and towels had increased. It means that the knitwear and towel makers had to export more quantities than the rest of the value-added textiles for showing growth in their sales abroad in terms of dollars.
All Pakistan Textile Mills Association (Aptma) chairman Gohar Ejaz said the increase in the dollar value of the exports owed a lot to free trade policies in the textile sector.
"The industry, particularly ancillary textile industry, has successfully - though only partially - transferred the recent hike in the raw material prices on the back of escalating global cotton prices to foreign buyers," he said. He was hopeful of the textile exports rising to $15 billion during the current fiscal from around $10 billion provided the industry, especially the valueadded industry, could transfer the increase in cotton and yarn rates to the buyers. The current fiscal's textile exports are projected to grow to $10.64 billion from $10.244 billion last financial year.
Exporters of the value-added textile products though admit that their buyers had started to factor in the recent escalation in cotton and yarn prices, they insist that the increase in their prices was not commensurate with the rise in their raw material prices and the cost of doing business.
"The foreign buyers have started to compensate us for the spike in the yarn prices. The hike is not enough," Ijaz Khokhar, chairman of the Pakistan Readymade Garments Manufacturers and Exporters Association (PRGMEA), told dawn.
He said the buyers also could not absorb the total increase in raw material prices because they could not hike their retail prices beyond a certain level. "In spite of the increased unit prices of textile exports, we are losing money on account of more than doubling of raw material rates and shortages of power and gas," he said.
Global cotton prices have more than doubled to $1.39 a pound. The year's average is forecast to be around $0.92 a pound. "While cotton market remains volatile, our buyers have given us a cushion of only five to 10 per cent," Khokhar said.
Many are hopeful that the existing trend of increase in dollar value of textile exports will continue to grow in the months to come. Some are not.
Aziz-ur-Rehman, a leading exporter from Karachi, dismissed the increase in textile exports as unimportant. "Does this increase in our textile exports show that we have increased our output and quantity of our exports? Do the numbers show that we have grabbed a bigger share in the world textile trade? The current hike in the textile exports in dollar value owes to the higher raw material costs. There's nothing to boast about," he said.
He said the escalation in the cost of doing business on the back of rising interest rates and utility rates and the price of the raw materials for the value-added textile meant that the industry's profitability had squeesed substantially. "Pakistan is at the bottom of the list of the foreign buyers. If they could they would not do business with Pakistan because of our country perception," he said.
A knitwear exporter from Lahore said the value-added sector was not getting decent returns (on exports). "If the current trend of rising yarn prices continues and the prices of the value-added textile products do not increase by 20-25 per cent the exporters will stop procuring yarn, resulting in the collapse of the domestic yarn market," he said.
Khokhar said, the yarn market would remain volatile as long as the "government did not frame an equitable policy for the entire textile chain." In order to stabilise the domestic yarn market and discourage price speculation, he suggested, the government should tell the yarn producers not to sell their product to investors. Only registered buyers should be allowed to purchase yarn, he said.
In the meanwhile, many spinners fear that the ancillary textile sector had again become active to get some sort of restriction imposed on yarn exports by raising false alarm about its availability in the domestic market to force down its prices.